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91_HB2271sam002
LRB9104872JSpcam02
1 AMENDMENT TO HOUSE BILL 2271
2 AMENDMENT NO. . Amend House Bill 2271, AS AMENDED,
3 by replacing the title with the following:
4 "AN ACT to create the Small Employer Health Insurance
5 Rating Act."; and
6 by replacing everything after the enacting clause with the
7 following:
8 "Section 1. Short title. This Act may be cited as the
9 Small Employer Health Insurance Rating Act.
10 Section 5. Purpose. The legislature recognizes that all
11 too often, small employers are forced to increase employee
12 co-pays and deductibles or drop health insurance coverage
13 altogether because of unexpected rate increases as a result
14 of one major medical problem. It is the intent of this Act
15 to improve the efficiency and fairness of the small group
16 health insurance marketplace.
17 Section 10. Definitions. For purposes of this Act:
18 "Actuarial certification" means a written statement by a
19 member of the American Academy of Actuaries or other
20 individual acceptable to the Director that a small employer
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1 carrier is in compliance with the provisions of Section 25 of
2 this Act, based upon an examination which includes a review
3 of the appropriate records and of the actuarial assumptions
4 and methods utilized by the small employer carrier in
5 establishing premium rates for the applicable health benefit
6 plans.
7 "Base premium rate" means for each class of business as
8 to a rating period, the lowest premium rate charged or which
9 could be charged under a rating system for that class of
10 business by the small employer carrier to small employers
11 with similar case characteristics for health benefit plans
12 with the same or similar coverage.
13 "Carrier" means any entity which provides health
14 insurance in this State. For the purposes of this Act,
15 carrier includes a licensed insurance company, a prepaid
16 hospital or medical service plan, a health maintenance
17 organization, or any other entity providing a plan of health
18 insurance or health benefits subject to state insurance
19 regulation.
20 "Case characteristics" means demographic, geographic or
21 other objective characteristics of a small employer, that are
22 considered by the small employer carrier, in the
23 determination of premium rates for the small employer. Claim
24 experience, health status, and duration of coverage shall not
25 be characteristics for the purposes of the Small Employer
26 Health Insurance Rating Act.
27 "Class of business" means all or a separate grouping of
28 small employers established pursuant to Section 20.
29 "Director" means the Director of Insurance.
30 "Department" means the Department of Insurance.
31 "Health benefit plan" or "plan" shall mean any hospital
32 or medical expense-incurred policy, hospital or medical
33 service plan contract, or health maintenance organization
34 subscriber contract. Health benefit plan shall not include
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1 individual, accident-only, credit, dental, vision, medicare
2 supplement, hospital indemnity, long term care, specific
3 disease, stop loss or disability income insurance, coverage
4 issued as a supplement to liability insurance, workers'
5 compensation or similar insurance, or automobile medical
6 payment insurance.
7 "Index rate" means, for each class of business as to a
8 rating period for small employers with similar case
9 characteristics, the arithmetic mean of the applicable base
10 premium rate and the corresponding highest premium rate.
11 "Late enrollee" has the meaning given that term in the
12 Illinois Health Insurance Portability and Accountability Act.
13 "New business premium rate" means, for each class of
14 business as to a rating period, the lowest premium rate
15 charged or offered or which could have been charged or
16 offered by the small employer carrier to small employers with
17 similar case characteristics for newly issued health benefit
18 plans with the same or similar coverage.
19 "Objective characteristics" means measurable or
20 observable phenomena. An example of a measurable
21 characteristic would be the number of employees who were late
22 enrollees. Examples of observable characteristics would be
23 geographic location of the employer or gender of the
24 employee.
25 "Premium" means all monies paid by a small employer and
26 eligible employees as a condition of receiving coverage from
27 a small employer carrier, including any fees or other
28 contributions associated with the health benefit plan.
29 "Rating period" means the calendar period for which
30 premium rates established by a small employer carrier are
31 assumed to be in effect.
32 "Small employer" has the meaning given that term in the
33 Illinois Health Insurance Portability and Accountability Act.
34 "Small employer carrier" means a carrier that offers
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1 health benefit plans covering employees of one or more small
2 employers in this State.
3 Section 15. Applicability and Scope.
4 (a) This Act shall apply to each health benefit plan for
5 a small employer that is delivered, issued for deliver,
6 renewed or continued in this State after July 1, 2000. For
7 purposes of this Section, the date a plan is continued shall
8 be the first rating period which commences after July 1,
9 2000.
10 The Act shall apply to any such health benefit plan which
11 provides coverage to employees of a small employer, except
12 that the Act shall not apply to individual health insurance
13 policies.
14 Section 20. Establishment of Class of Business.
15 (a) A small employer carrier may establish a separate
16 class of business only to reflect substantial differences in
17 expected claims experience or administrative costs related to
18 the following reasons:
19 (1) the small employer carrier uses more than one
20 type of system for the marketing and sale of health
21 benefit plans to small employers;
22 (2) the small employer carrier has acquired a class
23 of business from another small employer carrier; or
24 (3) the small employer carrier provides coverage to
25 one or more association groups.
26 (b) A small employer carrier may establish up to 4
27 separate classes of business under subsection (a).
28 (c) The Director may approve the establishment of
29 additional classes of business upon application to the
30 Director and a finding by the Director that such action would
31 enhance the efficiency and fairness of the small employer
32 marketplace.
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1 Section 25. Premium Rates.
2 (a) Premium rates for health benefit plans subject to
3 this Act shall be subject to all of the following provisions:
4 (1) The index rate for a rating period for any
5 class of business shall not exceed the index rate for any
6 other class of business by more than 20%.
7 (2) For a class of business, the premium rates
8 charged during a rating period to small employers with
9 similar case characteristics for the same or similar
10 coverage, or the rates that could be charged to such
11 employers under the rating system for that class of
12 business, shall not vary from the index rate by more than
13 25% of the index rate.
14 (3) The percentage increase in the premium rate
15 charged to a small employer for a new rating period shall
16 not exceed the sum of the following:
17 (A) the percentage change in the new business
18 premium rate measured from the first day of the
19 prior rating period to the first day of the new
20 rating period. In the case of a health benefit plan
21 into which the small employer carrier is no longer
22 enrolling new small employers, the small employer
23 carrier shall use the percentage change in the base
24 premium rate;
25 (B) an adjustment, not to exceed 15% annually
26 and adjusted pro rata for rating periods of less
27 than one year, due to claim experience, health
28 status, or duration of coverage of the employees or
29 dependents of the small employer as determined from
30 the small employer carrier's rate manual for the
31 class of business; and
32 (C) any adjustment due to change in coverage
33 or change in the case characteristics of the small
34 employer as determined from the small employer
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1 carrier's rate manual for the class of business.
2 (4) Adjustments in rates for a new rating period
3 due to claim experience, health status and duration of
4 coverage shall not be charged to individual employees or
5 dependents. Any such adjustment shall be applied
6 uniformly to the rates charged for all employees and
7 dependents of the small employer.
8 (5) In the case of health benefit plans delivered
9 or issued for deliver prior to the effective date of this
10 Act, a premium rate for a rating period may exceed the
11 ranges set forth in items (1) and (2) of subsection (a)
12 for a period of 3 years following the effective date of
13 this Act. In such case, the percentage increase in the
14 premium rate charged to a small employer for a new rating
15 period shall not exceed the sum of the following:
16 (A) the percentage change in the new business
17 premium rate measured from the first day of the
18 prior rating period to the first day of the new
19 rating period; in the case of a class of business
20 into which the small employer carrier is no longer
21 enrolling new small employes, the small employer
22 carrier shall use the percentage change in the base
23 premium rate, provided that such change does not
24 exceed, on a percentage basis, the change in the new
25 business premium rate for the most similar class of
26 business into which the small employer carrier is
27 actively enrolling new small employers; and
28 (B) any adjustment due to change in coverage
29 or change in the case characteristics of the small
30 employer as determined from the carrier's rate
31 manual for the class of business.
32 (6) Small employer carriers shall apply rating
33 factors, including case characteristics, consistently
34 with respect to all small employers in a class of
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1 business. A small employer carrier shall treat all health
2 benefit plans issued or renewed in the same calendar
3 month as having the same rating period.
4 (7) For the purposes of this subsection, a health
5 benefit plan that contains a restricted network provision
6 shall not be considered similar coverage to a health
7 benefit plan that does not contain such a provision,
8 provided that the restriction of benefits to network
9 providers results in substantial differences in claim
10 costs.
11 (b) A small employer carrier shall not transfer a small
12 employer involuntarily into or out of a class of business. A
13 small employer carrier shall not offer to transfer a small
14 employer into or out of a class of business unless such offer
15 is made to transfer all small employers in the class of
16 business without regard to case characteristics, claim
17 experience, health status or duration of coverage since
18 issue.
19 Section 30. Rating and underwriting records.
20 (a) A small employer carrier shall maintain at its
21 principal place of business a complete and detailed
22 description of its rating practices and renewal underwriting
23 practices, including information and documentation that
24 demonstrates that its rating methods and practices are based
25 upon commonly accepted actuarial assumptions and are in
26 accordance with sound actuarial principles.
27 (b) A small employer carrier shall file with the
28 Director annually on or before May 15, an actuarial
29 certification certifying that the carrier is in compliance
30 with this Act, and that the rating methods of the small
31 employer carrier are actuarially sound. Such certification
32 shall be in a form and manner, and shall contain such
33 information, as specified by the Director. A copy of the
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1 certification shall be retained by the small employer carrier
2 at its principal place of business for a period of three
3 years from the date of certification. This shall include any
4 work papers prepared in support of the actuarial
5 certification.
6 (c) A small employer carrier shall make the information
7 and documentation described in subsection (a) available to
8 the Director upon request. Except in cases of violations of
9 this Act, the information shall be considered proprietary and
10 trade secret information and shall not be subject to
11 disclosure by the Director to persons outside of the
12 Department except as agreed to by the small employer carrier
13 or as ordered by a court of competent jurisdiction.
14 Section 35. Suspension of Rate Requirements. The
15 Director may suspend all or any part of Section 25 as to the
16 premium rates applicable to one or more small employers for
17 one or more rating periods upon a filing by the small
18 employer carrier and a finding by the Director that either
19 the suspension is reasonable in light of the financial
20 viability of the carrier or the suspension would enhance the
21 efficiency and fairness of the small employer health
22 insurance marketplace.
23 Section 40. Director's Regulatory Authority. The
24 Director may adopt and promulgate rules and regulations to
25 carry out the provisions of this Act.
26 Section 99. Effective date. This Act takes effect
27 January 1, 2000.".